Ground Truth in Financing

OK, if you think you understand what it truly costs to borrow money, you can skip this lesson. If you want to see what I think it truly costs to borrow money, read on.

Just today I saw a refinance your home at $300,000 for around $900 a month. Lets see

$300,000 at 7% per year is an interest payment of $1750 per month. Somewhere it doesn't compute. If you pay it off in 5 years the principle payment would be $5,000 or 6750 per month plus taxes and insurance. If it was paid off in 30 years the principle payment would be between 800 and 900 per month for a payment of $2650 or $2750 per month. (plus taxes and Insurance)

What scares me is that when I see houses on the West Coast they are so grossly inflated that how could anyone buy one. I see the homes that would sell here for less than $100,000 selling for $800,000 to $900,000.

So, if you think you are in the market to finance or refinance be sure you are armed with the complete information. Hey, don't forget the inspections, title search and closing costs. If you have less than 80% of the price of the home outstanding when you close the deal you can generally close for little. More than that expect the costs to be $2,000 or $3,000 and in some cases points on the loan. (points are percentages so three points is 3% of the total of the loan)

Confused? Just do your homework.

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